Client needs and circumstances

FAIS Ombud Settlement – Always take clients’ needs and circumstances into account

Furnishing financial advice means adhering to a set of legislative requirements as well as keeping to certain principles. One of the settlements discussed in the latest FAIS Ombud Annual report puts the emphasis on a few provisions of the General Code of Conduct again. The fair treatment of clients also supports the General Code of Conduct and therefore this settlement also touches on the Treating Customers Fairly (TCF) outcomes.

It’s the duty of the adviser to identify the client’s needs and to take account of the client’s circumstances.

Choice of product

In the case F vs O a 52-year-old unemployed female approached a representative of the respondent for options available for her to invest the proceeds from the sale of her home. The representative recommended that she places her funds into an endowment policy.

As a result of financial difficulties she approached the respondent with the intention to withdraw the entire amount. On advice of the representative and not to incur penalty costs, she only made a partial withdrawal.

She was under the impression that the remainder of the funds would be intact, but was informed that it was only available in 2020 as new restrictions applied.

The complainant approached the FAIS Ombud. After investigation, the FAIS Ombud held that regardless of the documentation signed, consideration of the complainant’s personal circumstances would show that the product recommended was not appropriate.

Clearly, if a proper and honest needs analysis had been conducted, a different product would most likely have been recommended. The higher commission paid on endowments is often regarded as more important than the short- and long term circumstances of the client.

Click here to read more about the settlement.

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